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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






2. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






3. AFC = TFC/Q






4. Two goods are consumer substitutes if they provide essentially the same utility to consumers






5. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






6. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






7. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






8. Total product divided by labor employed. APL = TPL/L






9. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






10. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






11. Ei = (%dQd good X)/(%d Income)






12. The total quantity - or total output of a good produced at each quantity of labor employed






13. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






14. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






15. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






16. A good for which higher income increases demand






17. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






18. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






19. Product demand - productivity - prices of other resources - and complementary resources






20. 0 < Ei < 1






21. The rational decision maker chooses an action if MB = MC






22. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






23. The change in quantity demanded resulting from a change in the price of one good relative to other goods






24. Es = (%dQs) / (%dPrice)






25. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






26. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






27. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






28. MUx / Px = MUy/Py or MUx/MUy = Px/Py






29. TR = P * Qd






30. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






31. The price of a good measured in units of currency






32. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






33. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






34. The difference between total revenue and total explicit and implicit costs






35. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






36. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






37. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






38. Models where firms are competitive rivals seeking to gain at the expense of their rivals






39. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






40. A good for which higher income decreases demand






41. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






42. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






43. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






44. The additional cost incurred from the consumption of the next unit of a good or a service






45. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






46. Entry (or exit) of firms does not shift the cost curves of firms in the industry






47. Models where firms agree to mutually improve their situation






48. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






49. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






50. A firm that has market power in the factor market (a wage-setter)